Correlation Between Shinkong Insurance and ESUN Financial

Can any of the company-specific risk be diversified away by investing in both Shinkong Insurance and ESUN Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shinkong Insurance and ESUN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shinkong Insurance Co and ESUN Financial Holding, you can compare the effects of market volatilities on Shinkong Insurance and ESUN Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shinkong Insurance with a short position of ESUN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinkong Insurance and ESUN Financial.

Diversification Opportunities for Shinkong Insurance and ESUN Financial

-0.43

Correlation Coefficient

Shinkong Insurance  ESUN Financial

Very good diversification

The 3 months correlation between Shinkong and ESUN is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Shinkong Insurance Co and ESUN Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESUN Financial Holding and Shinkong Insurance is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shinkong Insurance Co are associated (or correlated) with ESUN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESUN Financial Holding has no effect on the direction of Shinkong Insurance i.e., Shinkong Insurance and ESUN Financial go up and down completely randomly.

Pair Corralation between Shinkong Insurance and ESUN Financial

Assuming the 90 days trading horizon Shinkong Insurance Co is expected to generate 1.42 times more return on investment than ESUN Financial. However, Shinkong Insurance is 1.42 times more volatile than ESUN Financial Holding. It trades about 0.12 of its potential returns per unit of risk. ESUN Financial Holding is currently generating about 0.03 per unit of risk. If you would invest  4,835  in Shinkong Insurance Co on September 19, 2024 and sell it today you would earn a total of  5,715  from holding Shinkong Insurance Co or generate 118.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shinkong Insurance Co  vs.  ESUN Financial Holding

Shinkong Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shinkong Insurance Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shinkong Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

ESUN Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESUN Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ESUN Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Shinkong Insurance and ESUN Financial

The main advantage of trading using opposite Shinkong Insurance and ESUN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinkong Insurance position performs unexpectedly, ESUN Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ESUN Financial will offset losses from the drop in ESUN Financial's long position.

The idea behind Shinkong Insurance Co and ESUN Financial Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.